Question 2 Skyscraper Ltd is a construction company and has been a client of your firm for five years. At the team planning meeting for the audit for the year ended 30 June, the following was discussed: Skyscraper Ltd is a profit-oriented entity and its core operation is construction development of residential properties. The company uses the percentage of completion method for revenue recognition (where revenue, expenses, and gross profit are recognized each period based on the percentage of work completed or costs incurred). The Risk Assessment Analytics shows an increase in revenue for the current year compared to previous periods. Skyscraper will be acquired by the market leader in the construction industry and one of the points in the draft purchase agreement states that the purchase price is a formula which is based on the construction revenue for the year. There was a change in key management contracts. Their bonuses will be calculated based on revenue for the financial year. Management's bonuses were previously calculated based on profit for the financial year. Required a) Explain the relation between acceptable audit risk and planned detection risk. (1 mark) b) From the information provided, describe the audit risk(s) and the red flags you should consider as you plan the audit of Skyscraper Ltd. (5 marks) c) As the audit senior, explain what the likely responses are to the audit risk(s) in planning the audit of Skyscraper Ltd